Today, the FDIC closed a deal that sold $1.45 billion in distressed residential and commercial construction loans from the failed First National Bank of Nevada. In two separate private/public partnership transactions, the FDIC sold 20 percent of the loan portfolio (which the FDIC had transferred to a limited liability company) to Diversified Business Strategies and Sterns Bank, NA, with the FDIC holding the remaining 80 percent. The FDIC’s percentage will be reduced to 60 percent once certain performance thresholds are met. The expenses and profits will be shared by the FDIC and the purchasers based on their respective percentage of ownership.
Deputy Director of the FDIC’s division resolutions and receivership stated that, “the FDIC is drawing on its previous successes and those of the Resolution Trust Corporation." He further stated that, “[d]uring the last banking crisis, when asset values were similarly difficult to ascertain, these types of structures ultimately resulted in superior recoveries relative to the then-depressed market valuations.”
This sale brings the total amount of assets sold through partnerships with the private sector to approximately $3.2 billion in the past year. The FDIC anticipates using this strategy in future sales.